Unit 4 Types of Credit

Front

The amount you owe as the cost to borrowing money

Back

Interest

Front

Which of the following statements comparing credit and debit cards is TRUE? Credit card companies provide you with a monthly statement, while debit cards do not, With debit cards, you're spending your own money at point of sale, but with credit cards, you're getting a loan that you need to pay back later, Credit cards pull money directly from your bank account, while debit cards get their money from Visa or Mastercard, Far more businesses accept credit cards than debit cards

Back

With debit cards, you're spending your own money at point of sale, but with credit cards, you're getting a loan that you need to pay back later

Front

The smallest amount of a credit card bill that a credit card holder must pay during a billing cycle to remain in good standing with the lender

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Minimum Payment

Front

Which of the following is most likely to represent a fixed rate, secured debt?
An auto loan, A credit card, A prepaid debit card, A student loan

Back

An auto loan

Front

Which of these statements best explains why it's often a good idea to pay more than the monthly amount due on an amortized loan? Options: Amortized loans typically have much higher interest rates than credit cards, so they're the best place to put your extra cash; The extra payment will be applied to the interest you owe, which will reduce the overall cost of your loan; The extra payment will be applied to the principal amount you owe, which will pay down your debt more quickly; Every time you pay extra, the lender will reduce the interest rate they're charging by a small amount

Back

The extra payment will be applied to the principal amount you owe, which will pay down your debt more quickly

Front

If you are having trouble making auto loan payments and are really following a tight budget, which recommendation below represents the WORST advice?
Stop making payments on some of your debts so you can focus on getting the most expensive or largest debts under control,
Find an extra source of income by taking a second job, working longer hours, or borrowing from family if they can afford to help,
Continue making all payments and call your lenders and see if you can negotiate lower monthly payments, lower interest rates, or longer terms,
Explore whether a free or non-profit credit counseling service could help

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Stop making payments on some of your debts so you can focus on getting the most expensive or largest debts under control

Front

Which of the following is true about fixed and adjustable-rate mortgages? Options: Fixed-rate mortgages have a fixed interest rate for a few years, after which time the interest rate fluctuates according to general market conditions; Adjustable-rate mortgages have a fixed interest rate for a few years, after which time the interest rate fluctuates according to general market conditions; The two mortgages work the same way but are called different names depending if they come from a bank or a credit union; Fixed-rate mortgages have a constant payment every month, but an interest rate that increases throughout the term of the loan

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Adjustable-rate mortgages have a fixed interest rate for a few years, after which time the interest rate fluctuates according to general market conditions

Front

Which of these credit payback strategies would lead to the HIGHEST overall cost? Options: Making the minimum payment (3% of your credit card balance) every month on time, Paying off your credit card bill in full every month, Making the minimum payment (3% of your credit card balance) every month with an occasional late payment, Paying 20% of your credit card balance every month on time

Back

Making the minimum payment (3% of your credit card balance) every month with an occasional late payment

Front

If Taylor wants the lowest monthly payments possible for a car costing $35,000 and has $5000 for a down payment, what should she do?

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Put in $5000 for your down payment, and choose a loan with a long term length.

Front

Reading through a credit card’s Schumer Box, you see the APR for a specific card is set at 9.99% - 23.99%. Which statement is true?

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Your APR will be within that range, depending on the strength of your credit history